> Loaned money isn't taxable income, so you can save/spend it without affecting your tax rate.
> Death is a popular escape from deferred taxes. When you die, your obligations to the government vanish. Your heirs inherit assets/property at market value. Their assets depreciate from new cost bases.
The article talks about taxes in the USA, and I think the treatment of taxes at death is unfair by giving a significant tax advantage to people who hold assets till death, especially with the step-up basis. The way Canada handles it seems more reasonable to me:
> Capital property generally includes real estate, such as homes and cottages, investments like stocks, mutual funds or crypto-assets, and personal belongings like artwork, collections or jewelry. When a person dies, they are considered to have sold all their property just prior to death, even though there is no actual disposition or sale. This is called a deemed disposition and may result in a capital gain or capital loss
In exchange, Canada does not have an inheritance tax. All taxation is resolved in the estate of the deceased person before the money or assets are passed on without further taxation.
Interesting, I wonder if you can do arrangements with terminally ill patients where you structure some deal with the dying people so that the money returns back to you tax free with a (relatively to the tax) small commission paid to the surviving family of the dead.
Pretty good overview of how/why these deductions reduce your taxable income. Couple of things to note.
Depreciation is recaptured if you sell an asset for more than its depreciated basis. People sometimes get into trouble with this if they rapidly depreciate real estate and then sell it. Even if you sell for less than your purchase price it is possible to owe taxes.
You also aren't going to be able to pay no taxes since you do need to realize some income to pay for mortgage/rent, food, transportation, etc. I guess if you had assets you could borrow against it would be possible to pay for these using the loan proceeds (which are not taxable).
>People sometimes get into trouble with this if they rapidly depreciate real estate and then sell it. Even if you sell for less than your purchase price it is possible to owe taxes.
But in the U.S. you can't rapidly depreciate real estate, it is generally straight-line over 27.5 or 39 years (residential vs. non-residential). The gain on real estate due to depreciation is technically referred to as Section 1250 gain, and if there is no gain (which is calculated against your adjusted basis, not purchase price), then it follows that there is no Sec. 1250 gain (often mistakenly called "depreciation recapture").
No, you can do cost segregation to classify some of the real property as Section 1245 (which is accelerated vs Section 1250). People doing this and then selling is how they get unexpected tax bills.
The thing I don't understand with these loan arguments is: don't you eventually need to pay taxes in the income you use to repay the loan? It seems to me that folks who take out such loans are just kicking the can down the road.
There are a bunch of strategies here, but one people oft repeat is the "buy, borrow, die" approach. Where, they are kicking the can down the road, but the magic happens at the die step. When the borrower dies:
Your heirs inherit your stocks, with their cost basis reset to the current price. This means that they have zero appreciation of your purchase of $RIVN at $67, despite it being at $420. They can then sell the shares, to pay the loans, and not owe capital gains, because there are no gains. Additionally, at this step cash can be extracted for no gains as well if desired.
So you avoid taxes while alive by taking loans (not income), avoiding capital gains (never selling), and then gains evaporate through a stepped up basis. There are some exceptions here - estate taxes, etc with ways around them like trusts, but this is the general mechanism.
Its worth noting though, that its not ironclad. In a significant downturn you can be forced to liquidate and it will hurt (see the news on Musk right after X purchase). Additionally, while people talk about this as being super popular, realize that in practice people who take advantage of these strategies also still have millions in cash flow, so its not a true borrow only $0 tax lifestyle, they will use already taxed money to manage them as well.
Minor nitpick. The step up in basis actually happens when you die (not when your heirs receive the assets), and your estate has to pay off creditors before distributing assets. So the debt is paid off first, then your heirs get whatever is left over. Net result is the same though.
I'm familiar with this strategy but there's one thing about it that I don't understand: After death, the loans are an estate liability, right? Doesn't the estate need to be settled before heirs get their inheritance? If i had an outstanding $1MM loan, wouldn't the estate need to liquidate some of that $RIVN at the $67 basis in order to pay the loan? and then whatever $RIVN was left over would go to the heirs at a stepped-up basis?
The step up in basis happens when you die, so the estate has no capital gain. Then the debts are paid, then the heirs get whatever they're supposed to get.
I conflated the two, since it all happens pretty quickly, but the estate is actually the recipient of the updated basis. So the estate sells @ current price, pays the negligible difference on gains from appreciation while the estate settles, if any happened, and then passes out the rest.
When the cash flow from the assets exceeds interest expense, you've cashed out the assets without incurring tax on your appreciated position and you can afford to pay the interest. As for principal, debt is largely not paid back these days, especially large bespoke debt secured by liquid and well-defined assets. The debt holders (lenders) get paid back after death of the borrower or they continue rolling the position and collecting their return (interest income). The only question in the lender's mind is how much leverage to grant on the underlying assets, e.g. blue chip stocks, and what to do in a liquidity crunch when rolling.
I don't know how these specific loans are structured but in real estate it's relatively common for a loan to be interest only with a balloon payment (the principal) due some number of years in the future. So in theory you could just pay off the balloon payment with a new loan and repeat the process.
Lenders have an amount of capital that they need to invest and earn returns -- they're generally not in the business temporarily so they don't want their capital back. And when the loans are secured by hard assets, e.g. publicly traded stocks, there's little risk of default so long as the price stays up. In times of rising stock prices, there's little to no reason for a debt holder (lender) to exit their positions at maturity. Rather roll and continue taking the return (interest).
You do. I think these loans are generally used for short term liquidity. For example if you want to buy a new house before selling your old one. You'd get a loan against your assets, buy the home with the loan proceeds, sell your old home and pay off the loan.
If your assets are growing faster than the interest it would also be possible to payoff the loan with a new (larger) loan, so you are still kicking the can down the road but eventually you would die and never need to pay the taxes while you were alive. I doubt this is done that often in practice, but who knows.
As mentioned in the article, death (and subsequent inheritance), solves this problem. Once you're dead, your tax situation changes significantly, and selling your assets to settle your debts is subject to estate taxes, not capital gains.
I.e. what kinds of loans can be tax deductible? To be clear theres decent effort into this, you can't just do a cash-out refi on a home, but loopholes exist for those who find it worth the effort.
A margin loan typically does not require any payments at all other than interest. Many loans are like this. Amortization for principal repayment is usually something you only find in personal or real estate loans
>Death is a popular escape from deferred taxes. When you die, your obligations to the government vanish. Your heirs inherit assets/property at market value. Their assets depreciate from new cost bases.
The article only addresses a subset of economic activity. The larger portion of the adult population are wage earners or retirees, not business owners. For them, large investments in Traditional IRAs or 401k plans are most definitely not able to escape upon death the income taxes that were deferred.
I'm not sure to understand how deferring taxes is a better deal than paying it here and now.
Since I'm not a financial adviser, someone asked me take on which 4k projector to buy last Xmas.
I explained that the tech has improved so much lately, they've become somewhat affordable, I recommended a model and pointed ou that he would certainly get a better device next Xmas, for half the price. I thought he would follow suit given his budget was a bit below the retail price. That would just wait.
His response was he would rather go ahead and up the budget a few hundred dollars to get it right away. That projectors will surely get much better by next year, but that he, certainly, will not.
Deferring taxes is essentially an interest-free loan from the government to you. You can take that money, invest it, and then keep most of the earnings when you eventually pay the taxes.
There are also some loopholes where capital gains taxes deferred until after death just don't get paid at all. This is the "step-up basis" where your inheritors get to reset the basis of capital assets and neither you nor they has to pay taxes on the capital gain.
This is what they call "buy borrow die" or some such. Buy an asset, borrow against it, die to reset the basis. Your estate will still have to repay the loans, but... that one part I don't really understand. Do they just refinance, taking a new loan against the newly valued asset?
This all seems to benefit from low interest rates. Was it a thing in the 90's? Or even the 80s when rates were much higher?
It's a strategy that's only really available to the ultra wealthy, because the banks are willing to give them a bespoke loan with a much lower interest rate that's payable after they die. There's also a complex trust setup to pass the asset to their heirs.
These laws are the way they are so that if a kid has their parents die they aren't facing an immediate giant tax bill on cap gains. It applies to basically anyone inheriting even a normal house. The difference in cost basis could be 90% of the value.
This is touched on briefly, the number one reason is that if you can keep deferring your taxes indefinitely then you never have to pay them. Your tax burden is wiped away on death so not only does it not matter to you but your heirs won't be affected either.
In addition to the other reasons given: Sometimes it also makes sense if your income is lumpy and you e.g. expect to have years where your income will fall into a lower tax band. It then can pay to suddenly recognise more income to take out as much as you can within the lower band.
Not sure I understand your example. If you always wait for the new version of a product to release the following year then you are never going to buy anything.
> For your leveraged investments, pay yourself in refinanced cash when your investments appreciate and/or credit rates drop.
In other words: Gamble that (1) your investments appreciate, or (2) that you will find credit rates drop when convenient.
In 1 word: Gamble.
So, either you are rich and have spare money to gamble, which sure, might be beneficial against taxes. But you could also gamble against any other sector (stocks, housing, startups...)
Or, if you are not rich, just put it in the 401k (or eq).
It seems to me that I'm running into more people who just don't file their taxes. They wait for the IRS to send them a letter saying how much they owe, and they just pay that.
I can't figure out the thought process of someone who finds this sensible. Maybe there isn't one.
I’ve never heard of anyone doing this, but now I kind of wish everyone did. Maybe it would force the IRS to just give us a bill instead of having us try our best to calculate what we owe, submitting that, and then hoping that we don’t get an angry letter when the IRS calculates it themselves and their answer doesn’t jive with ours.
Do you have an example? I've seen dozens of IRS letters for dozens of different taxpayers and none of them had any "angry" language in them.
The myth that the IRS is trying to scare or traumatize you is just a dark pattern by certain 3rd party "tax resolution" services. The IRS is quite tolerant of the person who breaks the law by not filing and paying on time and provides many opportunities to come into compliance, starting with an automatic first-time abatement of the most common penalties.
I file every year and I had one year where the IRS miscalculated my taxes twice on an older return. I got the first notice which was ok and they requested me to respond, which I did. The 2nd notice they recalculated what I owe and said I owed more than the original notice and said if I didn't pay in the next 1-2 months I owe tens of thousands of dollars plus interest. I ended up calling them and getting someone who needed help from someone else. She ended up laughing and hanging up the phone. I called again and got an old lady who immediately knew they made a mistake and I ended up with a $0 balance. If you get the right person, it is ok. I was kind of scared I would have to owe all this money I already paid and then some. It ended well but I lost sleep for days thinking about it.
They weren't angry with me. They were, however, obstinate. They disputed an education related credit. Each time I called them, they told me what documents they would need. I'd send it, and they'd continue the dispute. The cycle would repeat.
Here's what happened:
University sends me tax form. I file with my taxes.
"Just because they sent you the form doesn't mean you actually attended the school and paid your fees. Send us proof you paid them."
Sent proof of payments to the university.
"Just because you gave them money doesn't mean it was for tuition. For all we know they could be parking tickets. Send us the billing statement"
Called the university[1] to get a copy of the billing statement. Sent to the IRS to show the payments matched the tuition billed.
"Sorry, that's not enough. Send us a statement from the university with a line item showing the tuition was paid."
Sent it. They finally accepted it.
The university told me they'd never heard from any student that the IRS didn't simply accept the original tax form they send out.
[1] Keep in mind that this conversation happened 2-3 years after graduating.
I guess the accuracy of such solutions vary by jurisdiction; I just received my tax return for 2025 in Norway.
The sum owed I had calculated at the end of 2025 was less than 2% off from the sum our IRS equivalent came up with.
Their sum was the most favorable to me, though - they had adjusted a deduction I qualified for last year which I had missed.
This level of accuracy is down to our IRS knowing just about all there is to know about our income, assets, debts &c of course - oh, and on there being fewer loopholes in our tax code...
That seems like a terrible idea. A good tax accountant will help you find ways to lower tax burden and save money. The IRS has no such incentive, and will probably just tax you at the standard rates for your gross income.
There are more productive ways to vote with your money than tax evasion.
You can make tax-exempt donations, or start your own non-profit organization.
Some people hoard money without building businesses, without participating in government, without contributing to welfare. People who take more than they give are assholes.
In my state (NY), I pay income tax to the feds and NY state. I pay property tax to my county and town. This pays for things like roads, cleanup and maintenance, the school district, the library, the parks and sports recreations. The community trails and wildlife preserves.
You know that’s not the entire budget right? You’re being an asshole by denying funding for disaster relief, schools, healthcare, roads, scientific research, all the public goods and services that don’t work on a profit driven model.
If you want to play concerned citizen get out and protest, vote with your dollars by not throwing them at big tech companies who kowtow to politicians and fund their campaigns. But if you think you’re sending kind of message by withholding your taxes, it’s really just that you’re a selfish asshole.
> vote with your dollars by not throwing them at big tech companies
Abstaining is not voting. If you want to vote with your dollar, spend it actively undermining big tech companies. Get out there and blind some cameras or something.
RRSP first time home buyer credits can get a bit complicated though. Also, a fun fact - dual US-Canadian citizens can't (effectively) use TFSAs because the US considers appreciation in a TFSA to be taxable income.
> Defer US taxes by reinvesting your taxable income into the economy as business expenses, depreciating assets, etc.
Be really careful when doing this. Make sure you have a great accountant - if you go more than a few years without turning a measurable profit, your risk of being audited apparently goes up. My accountant personally cautioned me about this since my business has been in an R&D phase for 5 years so we've been showing a small loss every year. The last thing you want is for the IRS to decide you've been cheating on your taxes.
This is true for most businesses (they will reclassify it as a "hobby" where expenses aren't deductible, though you can fight that in tax court or real court if you want to) - but for rental properties you can go for decades with no profits (because of depreciation).
Can you elaborate? As a business owner in the U.S. I can opt to reinvest all revenue back into the business, thus would show zero net profit but (presumably) increase my company’s value. (And remember there are other taxes and fees paid to various governments, not just tax on income/profit, so it’s not typically like nothing gets paid.)
You can't reclassify profit as reinvestment to show zero net profit. (If you could every business would have an internal hedge fund or private equity business and would show zero net profit).
>As a business owner in the U.S. I can opt to reinvest all revenue back into the business,
Not entirely, no. Any of those reinvestments that count as capital expenditures aren't immediately deductible, but only on a throttled schedule, which is why the concept of depreciation exists in tax law:
This is why many people make minimun wage - they get a salary but they use the business profits to live on. See your accountant for all the fine print before doing this.
Up to now, I would have agreed with you. However, many residents of cities victimized by ICE see paying federal taxes as money that goes directly toward an enemy that is destroying their communities. I will happily pay my city and state taxes, but I no longer feel that my my federal tax dollars are helping much.
I live in Minneapolis, MN. The Federal government has cut public health grants, Medicaid, laid off a large portion of he Department of Health, cut Department of Human services, cut school funding, cut University of Minnesota funding, cut heating assistance, cut flood mitigation, cut USDA programs, and cut SNAP. This is just the things I can remember! Our city hosts Hennepin County Medical Center, which provides emergency care to the entire state, and it is risking closing due to federal cuts.
Minnesota has historically paid more in federal taxes than other states, and contributes more than it gets back. I think it's time for a change.
Is there really any correlation between tax revenue and spending at the federal level anymore? It seems the U.S. government is willing to spend at huge deficit levels. If everyone stopped paying federal taxes I suspect nothing would change.
What would change is the government would need to greatly increase their debt. In 2025 the government got about $5.23 trillion in tax revenue and spent about $7 trillion. So most of the government spending is financed by taxes. Remove that and the rate of debt quadruples (and by extension inflation).
That’s the trick. Don’t live anywhere. Every other country taxes based on residency rather than citizenship. If you’re not a U.S. citizen you can just wander around the world living tax free regardless of your income. Don’t stay anywhere long enough to become a tax resident.
Sorry but that's been a meme and a house of cards for since the Common Reporting Standard.
The fact is that the country whereever you carry any legal activity will require you to prove you're taxed elsewhere not to tax you in place.
To carry out economic activity you'll need a presence, if it's a company it's corporate tax, if you're freelance you'll need a registered address.
Most banks will freeze you without a TIN and and address.
Plus the whole can of worms of the centre of vital interests or source-based taxation systems.
In the moment you input an address in the financial system, the tax administration will know, and they will knock your door for any significant income, plus arrears, pulling one of the cards from your house, and it's not going to be pretty.
Picking a random country: Italy. Please explain under what legislation or mechanism an Italian citizen who spends 3 months in Japan, 3 months in South Korea, 3 months in the U.S., 3 months in Norway and then repeats the loop for the rest of their life would owe any taxes to any tax authority?
Almost every country except the United States only taxes their residents, not citizens. Almost every country follows the typical 180 day rule for tax residency.
It is a good thing for life, money and health, to be clear how much is enough. In money frugality always wins. These billionaires they're very miserable. Their faces show stress, worry and animosity. People say money does bring happiness. It is BS. It holds true only if there is health.
If what was supposed to be your tax dollars is instead going towards giving more people work to do (and hence generate more taxes) the government will be happy.
Funny thing, states like CA, TX, TN going after folks who thought it good idea to register vehicles in MN and not pay their own local state sales taxes...
Please consult a real tax lawyer before even following such advice...
Why? They have skin in the game such losing their license if they do something wrong and illegal...
So the advice here is (from my understanding, not a tax lawyer) sound, but it is "unsound-adjacent" -- so a lot of people will start from this basic understanding and then go off into crazytown.
So like influencers get to hear other influencers explaining this "you can reinvest your profits and then you won't have profits" type of advice... but then they will put it right next to unsound advice about "by the way, a great way is to invest in a "business" trip to Greece to sail the Mediterranean, it is "team-building" between you and your spouse and kids who are all employees of your little influencer company, oh by the way you should buy fancy watches so that you can show them off in your videos, and get a very expensive hairstylist to do your hair -- as long as you make a video about it!"
And it's like, no, the tax courts actually have procedures they follow to determine if those things are personal expenses or business expenses and 90% of the advice that you hear here are some form of tax fraud.
But from the point of view of a company, as the tax year comes to an end you hopefully have extra money left in the bank, now you can either use it to buy things that the company needs and thus grow the company, or you can hold onto it where if you're a C-corp the government will take 21% of the year-on-year delta, or you can pay it back to the shareholders as a dividend and they pay 15% capital gains tax on it. (And of course you don't have to dump the whole account into just one bucket, you can choose how much goes into each of the three.) And when it gives the advice "pssst, you should probably reinvest most of it," that's a standard practice explicitly sanctioned by the government.
I don't know if you're right or wrong, but it is an incredibly common tactic and done all the time by many businesses and people. There are of course ways to do this that are less noticeable by the IRS (as acknowledged in the article) and it doesn't seem like they have the capacity to investigate and audit the vast amount of this practice. My understanding is they are typically focused on fraud and/or folks simply not filing.
All of these techniques are entirely routine for the average company with even a semi decent accountant, and only marginally increase the chance of an audit.
You do have to be sure you follow the rules and avoid various gotchas that other people in this section have pointed out, but otherwise it is entirely legal and routine.
Nah, the maximally sarcastic advice for tax avoidance is "become president" then you can just refuse to prosecute yourself for tax evasion and sue yourself for a ridiculous sum of money when someone leaks your tax avoidance.